SuMar Company purchased a new piece of machinery by paying $2,000 down and agreeing to pay $1,000

Question:

SuMar Company purchased a new piece of machinery by paying $2,000 down and agreeing to pay $1,000 at the end of each year for five years. The appropriate interest rate is 8%.

Required
1. What is the cost of the machinery?
2. Prepare the journal entry to record the purchase of the machinery.
3. Prepare a table that shows the interest and ending balance of the liability each year. (Contributed by Norma C. Powell)